In 1993, the County Board of Supervisors voted to institute the Teeter Plan, providing the county with an optional alternative method for allocating property tax revenues to Special Districts—special service operations under independent operational jurisdictions such as water, fire, cemetery, hospital, ambulance service, sewer, recreation—allowing the county to pay 100 percent of the assessed tax revenue to special districts. Once the money owed to the special districts was paid, the balance of revenue collected was to be transferred to the general fund.
Special
districts, found in most California
counties, are able to plan budgets based upon guaranteed full projected revenue
from the Teeter Plan assessed taxes; these advances are paid whether or not the
County actually receives 100 percent of those property taxes. Historically
taxes are received at 95-97 percent of the assessed total. The problem occurs
when the 3- 5 percent deficit is not repaid.
According
to the Mendocino County 2019-2020 Civil Grand Jury’s report: future funding
sources may become insufficient; the local districts could cost the county
millions of dollars; and the county needs a plan to address this financial
burden.
Installments,
paid to the districts throughout the year – December 60 percent, April 30
percent, and June 10 percent – amounted
to $4.9 million in the 2019-20 budget. This method of calculating revenue
allows the districts to manage their operations; however, budgeting with money
that has not been collected has created a Teeter Plan deficit.
In
2012 when the grand jury reviewed the work of the Board of Supervisors in
regards to its management plan of the Teeter Plan, it was determined that the
plan needed restructuring.
A
committee was established to oversee the impact of the Teeter Plan on the
county budget; however, the GJ found no oversight by this committee at that
time stating that lack of oversight to repay the Plan could directly impact law
enforcement, labor and county services to the current date.
In
2015 the BOS developed a restructured repayment plan to the Teeter fund whereby
the principal and interest were repaid from actual taxes received resulting in
a balanced account. The actual revenue was balanced against projected revenue
to provide a more realistic picture of the solvency of the Teeter Plan.
Initially
this plan worked, but according to the GJ’s report, the county is again fast
approaching either a break-even point, or a point of insufficient money coming
in from the property taxes, which means that funding for the special districts
will come out of the general fund. The GJ found no plans to prevent a
duplication of the 2012 deficit should a recession occur.
When
property owners do not pay their taxes, or abandon their property, the County
is responsible for this portion of the special district funding. Taxpayers have
up to five years to pay their assessed property taxes. After that, the County
can foreclose on a house and try to recoup the funding distributed to the
districts. There is the example of Brooktrails, where hundreds of properties
have been abandoned leaving the County unable to collect taxes and unwilling to
foreclose. The County removed the Brooktrails Special District from the Teeter
Plan in 2013.
The
GJ reviewed documents, budget printouts, various state and local code sections
and interviewed county staff and elected officials determining that the since
the Teeter Plan was adopted in 1993, it worked well as long as the delinquent
assessed taxes, plus interest, were repaid.
But,
from 1993 through 2015 this repayment to the general fund was neglected and
in 2015 this neglect resulted in a
Teeter Plan deficit of $1.2 million.
In
a required response from the GJ 2012 report, the County Executive Officer
responded, “While there has been a lack of clarity on planned debt in the past,
the CEO formation of an Investment Review Committee comprised of the CEO,
Treasurer, Auditor/Controller and County Counsel has remedied the situation.”
One of the responsibilities of this committee is to provide oversight of the
Teeter Plan.
At
the time of this grand jury report, the members of the review committee were
unaware of that oversight responsibility. The committee meets on an as-needed
basis and, from interviews with committee members, the grand jury understands
that the Teeter Plan was rarely if ever discussed in those committee meetings.
This means there has been no oversight or accountability of the Plan.
For
several years there was an income from the Teeter Plan to the general fund from
one to five years delinquent special district assessed taxes and penalties that
provided surges of funding to the general fund, benefitting the county and
giving a somewhat false picture of health.
This
influx of funds has been decreasing annually to the point that for fiscal year
2019-20, the result may be no additional money deposited into the general fund.
From year to year there is no guarantee of what amount of assessed taxes will
be collected and what the County’s debt will be.
The
County must be prepared to cover the cost of the special district tax
obligation if the percentage of uncollected special district taxes becomes
insufficient. This negative budget change could impact County services in all
areas, including law enforcement and staffing levels.
In
light of an anticipated economic downturn, the BOS has the option to exit from
the Teeter Plan and revert to the position used prior to 1993 when special
districts received only the amount directly owed to each district from the tax
money collected. This would avoid the general fund being obliged to bail out
the Teeter Plan for the unfunded portion—3-5 percent of the tax base.
It
is clear to the GJ that this, along with other changes the BOS has placed on
the budget, is going to severely impact the funds of special districts. The BOS
needs to study the economic impacts of the budgetary changes they have already
implemented on the special districts. Should the BOS end the Teeter Plan,
special districts would have the ability to raise their assessed taxes through
a 2/3 vote of its residents.
The
GJ determined that over the past few years,
Teeter Plan difference between projected revenue and actual revenue
collected has been increasing; there is no current strategic plan to protect
county residential services such as public works, health and human services and
law enforcement should a recession occur; and, in the event of a decrease in
income from property assessed taxes, the special district obligation of 100
percent could create a deficit in the County budget.
The
Grand Jury recommends that the county provide management/oversight of the
Teeter Plan account; that the BOS terminate from the Teeter Plan all special
districts which no longer contribute their full amount in taxes to the county;
and that the BOS considers discontinuing the Teeter Plan for Mendocino County.
The
Ukiah Daily Journal
By KAREN RIFKIN
September 11, 2020
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